Do it yourself

It is a normal practice of market analysts (especially buy side analysts) to extrapolate historical data for validating their pre-drawn conclusions. For example, there are numerous research reports and messages which rely on “low per capita consumption” and “moat” in India to make a strong case for buying a particular stock or sector. Based on this, many “new businesses” (and some established businesses) are given astronomical valuations. In this context, I find it pertinent to note the following: ·           In the early 1990s, the number of Indian citizens using air transport for travelling purposes was extremely low. There was only one civil airline, viz., Indian Airlines. Then the civil aviation business was opened to private competition. Within a span of 2yr several private airlines started business, e.g., Sahara, NEPC, Damania, East West, Modiluft etc. All these ended as bankrupt in less than a decade. In the second tranche, some more p...

Economy: Weak input inflation and pullback in June trade (AXIS Capital) Input inflation continues to fall and should exert downward pressure on CPI goods inflation hereafter. Meanwhile, trade trends are showing signs of weakness after a sustained improvement in recent months. On the one hand, the moderation in the global industrial cycle, as seen from manufacturing PMIs due to tighter financing conditions, could keep a lid on India’s goods exports growth. On the other hand, pockets of buoyant domestic demand and food inflation will likely dictate RBI’s pause. June merchandise trade deficit fell by USD 2 bn to USD 20.1 bn, led by a weaker oil imports bill. Exports, in value terms, have slowed further, on ‘gems & jewelry’, engineering goods, and petroleum. Meanwhile, the imports bill was also weaker, led by oil, coal, machinery, and electronics. Our volume estimates for goods trade also indicate some pullback in exports and imports after witnessing a ramp-up in May. Weaker petro...

CAD slips in FY2023; better prospects in FY2024 (Kotak Securities) CAD/GDP improved in 4QFY23 led by a narrowing of the trade deficit (goods and services). Capital account surplus moderated from last quarter due to outflows in FPI and banking capital. CAD/GDP in FY2023 was at 2% and BOP at (-)US$9.1 bn with most of the pressure seen in 1HFY23. The external sector balance is likely to be much more comfortable in FY2024 amid a narrowing of goods trade deficit and firm services trade surplus. We expect CAD/GDP to improve sharply to 1% in FY2024. 4QFY23 CAD supported by lower goods trade deficit and steady services surplus:  CAD in 4QFY23 narrowed to US$1.4 bn (0.2% of GDP) from US$16.8 bn in 3QFY23. This was led by goods trade deficit narrowing to US$53 bn (3QFY23: (-)US$71 bn) with exports at US$116 bn (US$106 bn) and imports at US$168 bn (US$177 bn) due to lower non-oil imports. Services trade surplus was steady at US$39 bn aided by software exports and professional and management c...

Key economic trends (Elara Capital) ·          Deflationary impulses seem entrenched in the global economy. We believe global inflation may surprise on the downside through rest of CY23E. ·          We see the Fed pausing even in July 2023 meet – Expect the first rate cut by the Fed in Dec-23. ·          Historically, equities perform better in a hike cycle than a cut cycle. Bonds are a better bet in run up to rate cut cycle. Gold is the preferred commodity asset through both hike and cut cycles. The USD-INR usually fails to capitalize on the overall EM FX risk on sentiment in the run-up to a rate cut by the Fed. ·          Deflationary producer prices in China suggest weakening growth in G4 – the US, the EU, the UK and Japan. We do not rule out a sub 5% GDP growth in China in 2023E. (base case 5.2%) ·   ...